3 ms·

One issue here is using tax policy to incentivize investment in higher education by penalizing institutions for NOT spending huge endowment windfalls on higher

by jhugg 11y ago

One issue here is using tax policy to incentivize investment in higher education by penalizing institutions for NOT spending huge endowment windfalls on higher ed. You don’t tax Harvard the school like you tax a corporation. You tax Harvard the fund, if and only if it’s not existing primarily to support Harvard the school. Sitting on money doesn’t help the economy much.

chimeracoder 11y ago
> Sitting on money doesn’t help the economy much. This is a really dangerous misconception. "Sitting" on money isn't really possible, by definition. All money is being put to work at some point, it's just a question of where[0]. Broadly speaking, when people store money in banks, that money gets loaned out to people. If you have a mortgage, that's coming from money that someone was sitting on. If you are working at a venture-backed company, your paycheck is paid (through a lot of middlemen) from money that someone was sitting on. It's impossible for money to be 'sat on' without helping the economy. In fact, our economy depends on people saving money this way. [0] Again, this is true by definition; savings are investments. Saying that saving money isn't helpful is equivalent to saying that investing money isn't helpful.
- Retric 11y ago
  Banks can only give loans on a portion of their holdings, the rest of the money really does just sit there doing nothing. Arguably, it's a hedge however the FED even manages reserve requirements in terms of monitory policy not as a hedge. http://www.federalreserve.gov/monetarypolicy/reservereq.htm http://www.federalreserve.gov/monetarypolicy/reservereq.htm
slapshot 11y ago
> Sitting on money Except the Harvard endowment isn't "sitting" on it -- it's not hidden in some extra-long twin mattress somewhere. Harvard invests that money in a variety of places, including with a number of the large venture capital firms that make the Valley go round. The VCs then hand that money to entrepreneurs, who make (sometimes) useful new products. It works in part because Harvard has a 25+ year time horizon for its investments -- it can fund a startup today and not worry about liquidity for a decade. Harvard's bet is that in a decade, the next Uber will IPO and Harvard will get its funds back, plus a return. As a nice side-effect, entrepreneurs get funded, companies get built, etc. TL;DR: Investing is not "sitting on" money -- it funds other useful activities.

by jhugg 11y ago

chimeracoder 11y ago

> Sitting on money doesn’t help the economy much. This is a really dangerous misconception. "Sitting" on money isn't really possible, by definition. All money is being put to work at some point, it's just a question of where[0]. Broadly speaking, when people store money in banks, that money gets loaned out to people. If you have a mortgage, that's coming from money that someone was sitting on. If you are working at a venture-backed company, your paycheck is paid (through a lot of middlemen) from money that someone was sitting on. It's impossible for money to be 'sat on' without helping the economy. In fact, our economy depends on people saving money this way. [0] Again, this is true by definition; savings are investments. Saying that saving money isn't helpful is equivalent to saying that investing money isn't helpful.

Retric 11y ago
Banks can only give loans on a portion of their holdings, the rest of the money really does just sit there doing nothing. Arguably, it's a hedge however the FED even manages reserve requirements in terms of monitory policy not as a hedge. http://www.federalreserve.gov/monetarypolicy/reservereq.htm http://www.federalreserve.gov/monetarypolicy/reservereq.htm

slapshot 11y ago

> Sitting on money Except the Harvard endowment isn't "sitting" on it -- it's not hidden in some extra-long twin mattress somewhere. Harvard invests that money in a variety of places, including with a number of the large venture capital firms that make the Valley go round. The VCs then hand that money to entrepreneurs, who make (sometimes) useful new products. It works in part because Harvard has a 25+ year time horizon for its investments -- it can fund a startup today and not worry about liquidity for a decade. Harvard's bet is that in a decade, the next Uber will IPO and Harvard will get its funds back, plus a return. As a nice side-effect, entrepreneurs get funded, companies get built, etc. TL;DR: Investing is not "sitting on" money -- it funds other useful activities.